The first issue of our State Taxation Series looked at section 46F of the Land Tax Act 2005 (Vic) ("the Act"), and the three circumstances where a nomination can still be lodged for a discretionary trust that owns any pre-2006 land.
This issue looks at statutory requirements for the nomination of beneficiaries and providing notice of beneficial interests (as applicable) for the obtainment of relief from the trust surcharge rate of land tax in other circumstances (eg. post-2006 land) or trust structures (eg. unit and fixed trusts).
Unit and Discretionary trusts: Nomination of PPR beneficiary
Section 46A of the Act stipulates what the requirements are for the trust surcharge rate not to apply for unit and discretionary trusts:
- Nominated beneficiary (or nominated PPR beneficiary accordingly) for the land must be in force;
- The particular land must be used and occupied as the principal place of residence of the nominated PPR beneficiary;
- The land is not used to carry on a substantial business activity.
Should the requirements under section 46A of the Act be satisfied, then land tax will apply at the general rate.
Fixed trusts: Notice of beneficial interests
Section 46B of the Act states that a trustee of a fixed trust may lodge a written notice of the beneficial interests in the land.
When such a notice is in force under section 46B, the beneficiary of the trust is deemed to be the owner of land subject to the trust (proportionate to the beneficial interests held), and is to be assessed at the general rate for land tax on the land, including other taxable land owned by the beneficiary.
Unit trusts: Notice of beneficial interests
Section 46C of the Act prescribes that a trustee of a unit trust scheme to which land is subject may lodge a written notice of the unit holdings.
Similar to section 46B, when such a notice is in force, a unitholder is deemed to be the owner of land subject to the trust (proportionate to the beneficial interests held), and is to be assessed at the general rate for land tax on the land, including other taxable land owned by the beneficiary.
Fixed and Unit trusts: Beneficial interest as trustee of another trust
Section 46D of the Act states that under a trust (the first trust), should a beneficial interest be held by a person in the capacity as trustee of another trust (the second trust), the person is deemed to be the owner of land subject to the first trust (proportionate to the beneficial interests held in the first trust).
Accordingly, the person so deemed to be the owner of land of the first trust is assessed at the general rate of land tax.
It is also worth noting that section 46D(1)(a) of the Act relates to a fixed trust and section 46D(1)((b) relates to a unit trust.
Our following article discusses primary production land and the land tax exemption available under section 65 of the Act for land situated outside greater Melbourne.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.